INTRODUCTION
In 2023, Texas enacted sweeping reforms to its judicial system by creating a specialized business court structure designed to handle complex commercial disputes. The reform established the Texas Business Courts as specialized trial courts and created a new appellate body—the Fifteenth Court of Appeals—to hear appeals from those cases. The new courts became operational on September 1, 2024, marking the first time in the United States that a state created a dedicated appellate court for business cases. 

The new system is intended to improve efficiency, consistency, and predictability in high-stakes commercial litigation. For corporate entities, directors, and officers—and the insurers that underwrite Directors and Officers (D&O) liability insurance—these changes may significantly affect litigation strategy, forum selection, and risk exposure.

This article explains the structure of the Texas business court system, its relationship with district courts and the appellate system, and the potential implications for D&O insurance.

1. Background and Purpose of the Texas Business Courts

Prior to 2024, complex commercial disputes in Texas were typically litigated in general jurisdiction courts known as state district courts. While these courts handle a wide variety of cases—civil, criminal, and family matters—they had not focused on or specialized in complex corporate disputes that often require specialized judicial expertise and procedures.

To address these concerns, the Texas Legislature passed legislation in 2023 creating the Texas Business Court, a specialized civil court with jurisdiction over major business disputes. 

The goal of the reform was similar to business courts established in states, such as Delaware, North Carolina, and Nevada in order to:

• Increase judicial expertise in complex commercial matters
• Reduce litigation delays
• Create consistent precedent for business law disputes
• Make Texas a more attractive venue for corporate litigation and incorporation

The legislation also created the Fifteenth Court of Appeals, the first intermediate appellate court in the United States designed specifically for business-court appeals. 

2. Relationship with Texas District Courts

Traditional Role of District Courts

Texas district courts are the state’s primary trial courts of general jurisdiction. They hear a broad range of cases including civil disputes, criminal prosecutions, family law matters, and business litigation. 

Concurrent Jurisdiction

The business court does not replace district courts. Instead, it has concurrent jurisdiction with them for certain types of complex commercial disputes. 

This means that qualifying cases may be filed either in the business court or in a traditional district court, depending on the statutory criteria and strategic choices made by litigants.

However, in regions where the business court is operational, parties can “remove” certain qualifying cases from district court to business court by filing a “notice of removal” similar to removing a case from state court to federal court.

Geographic Structure

The business court system is organized into 11 geographic divisions, aligned with Texas’s administrative judicial regions. 

Initially, only five divisions opened in major metropolitan areas, including:

• Dallas
• Houston
• Austin
• San Antonio 
• Fort Worth

Each division has two judges, and additional divisions may become operational in future years depending on legislative funding.

Judges in the business court are appointed by the governor and confirmed by the Texas Senate, unlike district judges who are elected. This appointment system is designed to ensure that judges have experience in complex commercial litigation. Of the initial group of judges appointed, many of them were prior district or appellate judges, and some were complex commercial litigation practitioners.

3. Jurisdiction of the Texas Business Court

The business court’s jurisdiction focuses on complex business and commercial disputes, particularly those involving large financial stakes. Typical cases may include:

• Disputes involving publicly-traded companies
• Shareholder derivative actions
• Corporate governance disputes
• Breach of fiduciary duty claims
• Securities and partnership disputes
• Significant contract disputes

Originally, cases required an amount in controversy exceeding US$10 million to qualify for the business court. Subsequent legislative amendments lowered the threshold to $5 million for certain “qualified transactions.” The court also excludes certain categories, such as consumer transactions and many personal injury claims.

Importantly, the business court’s jurisdiction applies only to cases filed on or after September 1, 2024, according to early rulings interpreting the statute. Early cases also seem to show a trend of judges actively inquiring (i.e. requesting briefing on) whether the Business Court’s jurisdictional requirements are met.

4. The Appellate Structure

Traditional Texas Appellate System

Texas historically has had 14 regional intermediate appellate courts that review cases from their respective district and county courts. Appeals in civil cases are typically heard by a panel of three justices before a case may potentially proceed to the Supreme Court of Texas.

The Fifteenth Court of Appeals

The new Fifteenth Court of Appeals changes this structure. Unlike the regional courts, the Fifteenth Court has statewide jurisdiction over certain civil cases, including primarily appeals from the Texas Business Courts, but also cases involving state agencies and certain constitutional or administrative disputes. Because appeals from the business court go directly to this specialized appellate court, the reform creates a dedicated litigation track for complex business disputes.

5. Procedural Features of the Business Court

The Texas Business Court adopts several procedural features designed to resemble federal commercial litigation. These include:

• Specialized rules for complex discovery
• Structured case management procedures
• Corporate disclosure requirements
• Provisions facilitating mediation and early resolution

The rules also allow judges in different divisions to exchange benches. Such exchanges may promote consistency in Texas overall and better manage workload, although it may also create some uncertainty for results in any one of the new Business Court divisions. Such features are intended to streamline litigation and reduce delays that can occur in crowded general jurisdiction district courts.

6. Strategic Implications for Corporate Litigation

The creation of a specialized business court introduces several strategic considerations for companies operating in Texas.

Forum Selection

Companies negotiating major commercial agreements may now consider whether to include forum-selection clauses directing disputes to the Texas Business Courts at the state level. Specialized courts should provide judges who are more experienced in commercial law and, ideally, produce more predictable rulings. Centralizing appeals in the Fifteenth Court of Appeals could also lead to a more consistent body of commercial law precedent across Texas. For corporate defendants and plaintiffs alike, this may increase predictability in litigation outcomes.

Codified Business Judgment Rule

Effective May 2025, Texas also formally codified the business judgment rule. Directors and officers, therefore, benefit from a presumption of acting in good faith, on an informed basis, and in the corporation’s best interest. This presumption applies to publicly traded companies or those private companies that opt in by their governing documents. Claimants must, therefore, meet a high bar—proving fraud, misconduct, or legal violations with specificity—to counter the presumption and prevail on a claim.

Combined with the new business court system, changes in Texas, such as codifying the business judgment rule and the existing lack of state income taxes, may appeal to new entity formations.

7. Implications for Directors and Officers (D&O) Insurance

The new business court system has meaningful implications for insurers and policyholders involved in D&O liability coverage and D&O litigation.

As a heavily populated and litigious state, Texas already has well-established case law precedent on many insurance coverage issues. Whether or not those precedents are favorable to corporate policyholders or insurers, Texas at least provides somewhat more predictable outcomes than other jurisdictions with fewer decisions.

With the creation of the business court system and Texas’ first-in-the-country appellate court exclusively dedicated to business cases, the insurance coverage precedent may be applied and developed specifically in the context of claims that D&O insurance is designed to insure—breaches of fiduciary duty, shareholder derivative litigation, and securities violations. Cases asserting those theories fall squarely within the jurisdiction of the business court (assuming such cases are not removed to federal court).

D&O insurers will surely see a concentration of high-value claims in this forum and judicial scrutiny of corporate conduct. If the specialized courts result in more efficiency and faster litigation timelines, as intended, the new court system could also result in lower defenses costs. Lower defense costs could impact how claims are reserved, how limits are exhausted, and, eventually, how premiums are set.

CONCLUSION
The creation of the Texas Business Court and the Fifteenth Court of Appeals represents a significant structural change in the state’s judicial system. By establishing a specialized trial and appellate track for complex commercial disputes, Texas aims to enhance efficiency, judicial expertise, and predictability. The change is part of a broader strategy for Texas to position itself as a leading jurisdiction for business formation and corporate litigation that already includes favorable tax treatment and legal presumptions in favor of directors and officers.

Director and officer liability claims may become a substantial portion of Texas’s business court docket. As a result, D&O insurers may be wise to monitor the court’s developing case law, procedural norms, and litigation outcomes.

Although the system is still in its early stages, it will certainly impact the landscape of corporate litigation in Texas and could influence underwriting, claims management, and governance practices across the country.